Record falls of Bitcoin rates in last 16 months: Seems giving up 2021 gains
The world's largest cryptocurrency dropped around 2% to as low as $28,379.26, its lowest since January 2021
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Stocks staggered Wednesday as inflation proved to be stickier than economists had anticipated, heightening concerns about how much the Federal Reserve may have to further tighten financial conditions to curb inflation. Investors are worried that aggressive interest-rate increases could weigh on growth, already a concern with Covid-19 lockdowns in some Chinese cities and the war in Ukraine.
Bitcoin fell to its lowest in 16 months on Thursday, leading a rush out of risk assets such as tech stocks, while the collapse of Terra USD, a so-called stable coin, underscored the strain on cryptocurrency markets.
The world's largest cryptocurrency dropped as low as $26,970, to stand at its lowest since December 28, 2020. In the last eight sessions, it has lost a third of its value, or $13,000.
Bitcoin surged in 2021 to reach its all-time high of $69,000 that November.
Traders say its recent decline mirrors tumbles in tech stocks, as the Nasdaq has lost 6.4 percent this week.
Another factor at play is the spectacular collapse of Terra USD, once the world's third largest stable coin, which broke its dollar peg this week to fall as low as 30 US cents, causing ructions in the crypto industry.
Conversely, when TerraUSD’s value rose above $1, traders could burn Luna and create new TerraUSD, thus increasing the supply of the stablecoin and lowering its price back toward $1.
This system ceased to stabilize the cryptocurrency after a series of large withdrawals of TerraUSD from Anchor Protocol, a sort of decentralized bank for crypto investors. At the same time, TerraUSD was also sold for other stablecoins through various liquidity pools that contribute to the stability of the peg. The sudden rush of selling spooked some traders, who intensified the rout.
The break in TerraUSD has also caused concerns that other stable coins could break from their typical levels. Tether, the largest stable coin by market value, fell to 97 cents at 3 a.m. ET before rebounding to 99.6 cents at 5:15 a.m. Some hedge funds have intensified bets that tether could break from its $1 level in recent days, investors say.